While most people recognize the importance of saving money, many people find it very difficult to do so. According to recent findings by the Pew Research Center on the savings habits of Americans, 73% of people aged 24 to 49 say they should be saving more money. When asked what they would cut back on, responses fell largely into three categories: entertainment and recreation, food and dining out, and shopping and personal items.
In large part, these and other similar categories represent day-to-day expenditures consisting of small amounts spent here and there on things that are not necessarily needed but are desired at the time such as desserts, snacks, movies, clothing, meals out, and the like. These things are often extremely difficult to say no to because they are generally low-cost items and provide immediate gratification. If people were able to cut back on these types of small expenditures which occur regularly, if not daily, they could save a considerable amount of money over the course of a week, a month, or longer.
There are several commonly known techniques to save money. One technique is budgeting. Budgeting involves tracking expenses over time, identifying unnecessary expenditures, and then setting a weekly or monthly spending limit that eliminates the unnecessary expenditures. Unfortunately, adhering to a budget takes extreme discipline, especially when presented with an unnecessary but low-cost purchase that offers immediate gratification. In fact, studies have shown that people who keep budgets are as likely to overspend as those who do not budget.
Another technique to save is by setting up recurring, automatic drafts of money from one's checking account to one's savings account. Though this may work for some, it often creates a larger problem, because the technique does nothing to address spending habits. Success of this technique is premised on the idea that if the money is not available in one's checking account it simply cannot be spent. This would hold true if money were not available from some other source. However, the use of credit has become so common for even basic purchases that it takes great self-discipline not to use a credit card when the money in the checking account has run out. For example, a person might set up an automatic savings draft of $100 per month but then find themselves charging $110 on their credit card that month. If this money is not paid back immediately, there is not only no net savings for the month but, given the difference in interest charged on the borrowed money and paid on the “saved” money, the loss is compounded over time.
Yet another approach is to offer or share tips on saving money. Examples of tips include where and when sales and promotions are taking place, deals given by discount retailers, and which companies offer cheaper services. This may reduce one's costs, but if the product or service purchased was unnecessary, no “savings” can be claimed.
Given the shortcomings of the savings methods discussed above, a need presently exists for a savings method that will help people to alter their spending habits by providing them a reward for not spending. If the reward is great enough and can be delivered at the moment the decision to not spend is made, the immediate gratification promised by a product or service will not seem as compelling as otherwise, and the money will not be wasted but saved instead.